Compare life insurance in Canada

What is life insurance?

Life insurance is a financial safety-net for your loved ones in the event of your passing. Think of life insurance as a contract between you and your insurance company. You pay a premium to maintain your coverage and when you die, your insurer pays out your policy to your beneficiaries. This payment is known as a death benefit.

Protect your family from financial instability with the security of a life insurance policy designed to settle your debts, pay for funeral costs, set up an inheritance or even help with medical expenses if you’re unable to care for yourself. That way, your friends and family can focus on healing after loss and celebrating your life.

How does life insurance work?

When is life insurance paid out?

The death benefit is paid out when you die. It’s typically paid out in a lump sum — but you can instruct your insurer to pay the death benefit in installments or annuities.

Your beneficiaries can then use the money however they wish. These are some of the most common ways people spend the cash:

• Mortgage payments
• Living expenses — like utility bills, groceries, rent, health and car insurance
• Cosigned debts — such as student loans or credit cards
• End-of-life expenses — including funeral costs and unpaid medical bills
• Child care
• Long-term care — like a nursing home or medical expenses for ailing parents
• College tuition

Is the death benefit taxed?

No. Fortunately, the death benefit isn’t considered part of the beneficiary’s taxable income. However, if the policy had an investment component that generated interest, the estate (not the beneficiary) might be subject to income tax. By the time the beneficiary receives the death benefit, income tax has already been covered by the deceased’s estate.

Different types of life insurance

Life insurance plans are lumped into 4 main categories: term, permanent, no-medical exam and group life policies.

Term life insurance

Provides protection for a set period of time, like 10, 15 or 20 years.

Permanent life insurance

A life insurance policy and investment product rolled into one, these policies offer lifelong coverage and accumulate cash value over time. When you pay your premium, a portion will go towards the cash value of your policy, which earns interest as it grows.

No-medical exam policies

If you don’t want to take a medical exam for whatever reason, these are your policy options.

Group life insurance

A type of term life insurance offered through the workplace as part of employee benefits.

But that’s not all: There are other niche types of coverage, like joint life insurance insurance and mortgage life insurance.

Who needs life insurance?

Here’s the golden rule. If you have loved ones who depend on you financially, you most likely need life insurance. Your policy can help to provide for them when you’re gone. These people have the greatest need for life insurance:

How to get a life insurance policy

How much does life insurance cost?

While rates can vary wildly, the average cost for life insurance is less than $50 a month. For example, a 20-year term life insurance policy worth $100,000 for a male non-smoker between the ages of 30 and 40, assuming he’s in relatively good health, would average around $18-$26 a month.

Your rate depends on a range of factors, like your age, gender, health, occupation, lifestyle and whether you’re a smoker. The coverage amount, term length and type of policy you’re applying for come into play, too. Insurers weigh these factors differently, which is why it’s important to compare quotes from multiple companies.

Managing a life insurance policy

There’s a little bit of life admin involved in buying and maintaining a life insurance policy. Here’s what you need to know.

Choosing and changing beneficiaries

Most people name their spouse or children as their beneficiaries, but you don’t have to. You can choose another family member, friend, business partner, charitable organization or a legal entity — like an estate or trust. Things can get a little complicated if you want to elect a minor.

You may name multiple beneficiaries, and indicate which percentage of the death benefit should go to each. You can usually update the list at any time.

Canceling your policy

You can cancel your life insurance whenever you want. But you’ll only receive a refund of any premiums you paid in these situations:

• You cancelled during the “free look period,” or “cooling-off period.” When you buy a policy, your insurer is legally required to give you time to change your mind. This is the free look period, and it usually lasts 10 days.
• You bought a return of premium rider. If you cancel your coverage, you’ll be reimbursed for the premiums you paid — minus any administrative fees.

What kind of life insurance do I need?

Start by deciding whether you want coverage for a certain period or the rest of your life. Term life covers you for a specified period of typically 5 to 30 years, with options to convert your policy to another term if you need. Whole life insurance is a type of permanent policy, with lifelong coverage and a cash value component plus dividends.

Life insurance policy options

	Term life	Whole life	Universal life	Variable life	Variable universal life
Length of term	1 to 30 years	Life	Life	Life	Life
Cost of premium	Level premiums	Level premiums	Premiums can vary	Level premiums	Premiums can vary
Guaranteed death benefit
Guaranteed cash value			May be exhausted to pay premiums, safeguarded from risk
How your money appreciates or depreciates	N/A	Set rate of interest	Variable rate of interest	Pooled accounts managed by investors	Pooled accounts managed by investors
What you should know	You can’t lose coverage, and you receive no premium refund at the end of the term	Not as flexible as other life insurance options	Flexible policy options and premiums	High-priced policy with no or minimal cash appreciation	High-priced policy with no or minimal cash appreciation

How is life insurance paid out?

The death benefit is paid out when you die. Most life insurance providers pay out claims within 60 days, with most states allowing your insurer up to 30 days to investigate your claim, if necessary. It’s typically paid out in a lump sum — but you can instruct your insurer to pay the death benefit in installments or annuities.

Your beneficiaries can then use the money however they wish. These are some of the most common ways people spend the cash:

How to compare life insurance policies

To find a comprehensive life insurance policy at the best rates, look into how coverage amounts affect your premiums, the flexibility of your policy options and additional riders or features specific to the providers you’re interested in.

To simplify the process of comparing different policies, ask yourself:

How much coverage should I get?

Given the general unpredictability of life, there’s no one universal answer for how much coverage you should buy. Experts will tell you to start with a multiple of your annual income — up to 10 times your salary. Generally, you want to determine an amount that will cover immediate and ongoing costs after you die, so that your family and other dependents can support their current way of life. more info button

When determining how much coverage is enough to protect your family, consider your debts, living expenses and lifestyle. Also plan for how your loved ones will pay for your funeral, burial and related expenses.

What affects my life insurance premiums?

To calculate your policy’s premiums, life insurance providers engage a complicated review of your age, health and lifestyle called underwriting. They often run these details through proprietary algorithms and analytical tools to determine the level of risk in taking you on as a policyholder.
How a life insurance provider rates you within each category varies, but most consider:

• Your age. Age is the No. 1 factor that determines your premiums. Generally, the younger you are, the less of a risk you present to the insurer — and the lower premiums you’ll pay.
• Your gender. Women generally live longer than men. Because this means a policy will likely be longer, they tend to have lower premiums than men.
• Your health history. If you have a history of medical conditions, an insurer might consider you a risk for future, more serious issues, bumping up your premium accordingly. If you can prove to the insurer that you’re managing any existing condition, it might help you lock in a lower rate.
• Your occupation and lifestyle. If you work in a dangerous field or embrace life like a daredevil, potential insurers may consider you a person with high potential for death. Because most insurers will assume an inevitable policy payout, your premium will undoubtedly be high.
• Your relationship with alcohol and nicotine. Drinking and smoking are risks to your health, and you could end up paying double the life insurance premium for those with less risky habits.
• Your family’s medical history. If you come from a line of relatives with serous health issues, especially hereditary conditions, insurers might conclude that you will too, resulting in higher premiums.
• Your driving record. Today, many insurers consider your actions behind the wheel when determining costs. If you’ve racked up driving violations or serious convictions, you might pay higher rates.

Should I buy directly or through a broker?

You have options when shopping for a life insurance policy. You’ll find brokers that work with a range of companies to help you find the best prices in their network on the coverage you need, but they may not offer the personalized service you’ll find with a direct agent.

Both broker and agents work on behalf of providers to sell you a life insurance policy. It all comes down weighing each against what you’re looking for.

Life insurance FAQs

• Who do insurers classify as a smoker?

  If you've casually or regularly smoked tobacco in the last 12 months, most insurers will classify you as a smoker. Some insurers are more lenient, and will allow a celebratory cigar once in a while without assigning you a smoking status.

• What happens if I can't make a premium payment?

  First, contact your insurer immediately to explain your hardship and discuss next steps. You might be able to freeze premiums for a short time until you're back on your feet.

• What's the difference between a life insurance broker and an agent?

  Agents are typically tied to one or more life insurance companies. They have expert knowledge of those insurers' products, and can help you to complete your application. On the other hand, a broker works for you. They assess your situation and find the best possible policy for your needs.

• What if I already have life insurance through work?

  While group life insurance is a solid employee benefit, it's often capped at smaller amounts, like $100,000 — and this may leave you underinsured. Group policies aren't portable either, which means you'll lose your coverage if you change jobs.

• Do I really need life insurance if I'm a stay-at-home parent?

  As a stay-at-home parent, you probably do a lot of unpaid labor, like cooking, cleaning and chauffeuring the kids around. If you die, a life insurance policy can help your family hire someone else to take over those tasks.

• I'm single and don't have any dependents. Should I buy life insurance?

  It depends. If you have student loans, a mortgage or other debts, a life insurance policy can pay those outstanding balances. That way, your loved ones won't be saddled with your debt if you die prematurely. It's also a good idea to buy a policy if you want to cover the costs of your own funeral.

• I'm a beneficiary. How do I claim the death benefit?

  When the policyholder dies, it's up to you to file a claim. You'll need to fill out a claim form and submit a certified copy of the death certificate and any other supporting information to the insurance company. The insurer will then review the claim and pay out the policy once it's approved.